FINRA Series 65 Examination Questions
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Plus Rationales 2026 Q&A | Instant
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Uniform Investment Adviser Law Examination
1. An investment adviser representative (IAR) is managing a portfolio for a
high-net-worth client. The client wishes to generate income while
minimizing federal income tax liability. Which of the following securities
would be most appropriate for this client?
A. High-yield corporate bonds
B. General obligation municipal bonds
C. Real Estate Investment Trusts (REITs)
D. Growth stock mutual funds
Answer: B
Rationale: Municipal bonds, including general obligation (GO) bonds, pay
interest that is generally exempt from federal income taxes. For a high-net-
worth client looking for income while minimizing federal tax liability, municipal
bonds are the most suitable choice among the options provided. Corporate
bonds and REITs generate fully taxable income, while growth stocks focus on
capital appreciation rather than income.
2. Under the Uniform Securities Act, which of the following is considered an
"investment adviser"?
A. A bank that provides investment advice for a fee
,B. A broker-dealer who charges a flat fee for financial planning services that
include investment advice
C. A publisher of a bona fide newsletter that provides general impersonal
investment advice
D. An investment adviser representative
Answer: B
Rationale: Under the Uniform Securities Act, any person who engages in the
business of advising others for compensation must register as an investment
adviser. If a broker-dealer charges a special or separate fee for investment
advice (such as a flat fee for financial planning), they lose their exclusion and
must register as an investment adviser. Banks and bona fide publishers are
explicitly excluded from the definition. An investment adviser representative is
an individual associated with an investment adviser and is not the investment
adviser itself.
3. An investor purchases a 10-year corporate bond with a 6% coupon rate at
par. Three years later, market interest rates rise to 8%. Which of the
following statements is true regarding the bond's price and yield?
A. The bond's price will rise, and its yield to maturity will decrease.
B. The bond's price will fall, and its yield to maturity will increase.
C. The bond's price will remain at par, and its current yield will rise.
D. The bond's price will fall, and its coupon rate will increase.
Answer: B
Rationale: There is an inverse relationship between interest rates and bond
prices. When market interest rates rise, existing bonds with lower coupon rates
become less attractive, causing their prices to fall. As the bond's market price
decreases, its yield to maturity increases to align with current market rates. The
coupon rate remains fixed throughout the life of the bond.
, 4. Which of the following descriptive characteristics best defines a "Value"
stock?
A. High price-to-earnings ratio and high dividend yield
B. Low price-to-earnings ratio and low price-to-book ratio
C. High price-to-book ratio and high earnings growth rate
D. Low dividend yield and high beta
Answer: B
Rationale: Value stocks are typically characterized by selling at a low price
relative to their underlying fundamentals. Common metrics for value stocks
include a low price-to-earnings (P/E) ratio, a low price-to-book (P/B) ratio, and
often a higher dividend yield. High P/E and high growth rates are characteristics
of growth stocks.
5. Under the Investment Advisers Act of 1940, an investment adviser must
maintain all required books and records for a period of not less than how
many years from the end of the fiscal year in which the last entry was
made?
A. 3 years
B. 5 years
C. 6 years
D. 10 years
Answer: B
Rationale: The Investment Advisers Act of 1940 requires federal covered
investment advisers to maintain all required books and records for a period of
not less than 5 years from the end of the fiscal year in which the last entry was
made. Additionally, these records must be kept in an easily accessible place for
the first 2 years.
, 6. A standard modern portfolio theory measure that quantifies the volatility of
a specific mutual fund relative to the market as a whole is known as:
A. Alpha
B. Beta
C. Standard deviation
D. R-squared
Answer: B
Rationale: Beta measures the systematic risk or volatility of a security or
portfolio relative to the broader market (usually represented by the S&P 500). A
beta of 1.0 indicates the security moves in tandem with the market; a beta
greater than 1.0 indicates higher volatility, and less than 1.0 indicates lower
volatility. Alpha measures risk-adjusted excess return, and standard deviation
measures total volatility.
7. According to the Uniform Securities Act, an investment adviser's
registration becomes effective at noon on the:
A. 15th day after filing a completed application
B. 30th day after filing a completed application
C. 45th day after filing a completed application
D. 60th day after filing a completed application
Answer: B
Rationale: Under the Uniform Securities Act, if no denial or stop order is in effect
and no proceeding is pending, registration automatically becomes effective at
noon on the 30th day after the application is filed, unless the Administrator
specifies an earlier date or establishes a different timeline due to amendments.
8. Which of the following retirement plans allows for the highest catch-up
contribution for an individual over the age of 50?
And Correct Answers (Verified Answers)
Plus Rationales 2026 Q&A | Instant
Download Pdf
Uniform Investment Adviser Law Examination
1. An investment adviser representative (IAR) is managing a portfolio for a
high-net-worth client. The client wishes to generate income while
minimizing federal income tax liability. Which of the following securities
would be most appropriate for this client?
A. High-yield corporate bonds
B. General obligation municipal bonds
C. Real Estate Investment Trusts (REITs)
D. Growth stock mutual funds
Answer: B
Rationale: Municipal bonds, including general obligation (GO) bonds, pay
interest that is generally exempt from federal income taxes. For a high-net-
worth client looking for income while minimizing federal tax liability, municipal
bonds are the most suitable choice among the options provided. Corporate
bonds and REITs generate fully taxable income, while growth stocks focus on
capital appreciation rather than income.
2. Under the Uniform Securities Act, which of the following is considered an
"investment adviser"?
A. A bank that provides investment advice for a fee
,B. A broker-dealer who charges a flat fee for financial planning services that
include investment advice
C. A publisher of a bona fide newsletter that provides general impersonal
investment advice
D. An investment adviser representative
Answer: B
Rationale: Under the Uniform Securities Act, any person who engages in the
business of advising others for compensation must register as an investment
adviser. If a broker-dealer charges a special or separate fee for investment
advice (such as a flat fee for financial planning), they lose their exclusion and
must register as an investment adviser. Banks and bona fide publishers are
explicitly excluded from the definition. An investment adviser representative is
an individual associated with an investment adviser and is not the investment
adviser itself.
3. An investor purchases a 10-year corporate bond with a 6% coupon rate at
par. Three years later, market interest rates rise to 8%. Which of the
following statements is true regarding the bond's price and yield?
A. The bond's price will rise, and its yield to maturity will decrease.
B. The bond's price will fall, and its yield to maturity will increase.
C. The bond's price will remain at par, and its current yield will rise.
D. The bond's price will fall, and its coupon rate will increase.
Answer: B
Rationale: There is an inverse relationship between interest rates and bond
prices. When market interest rates rise, existing bonds with lower coupon rates
become less attractive, causing their prices to fall. As the bond's market price
decreases, its yield to maturity increases to align with current market rates. The
coupon rate remains fixed throughout the life of the bond.
, 4. Which of the following descriptive characteristics best defines a "Value"
stock?
A. High price-to-earnings ratio and high dividend yield
B. Low price-to-earnings ratio and low price-to-book ratio
C. High price-to-book ratio and high earnings growth rate
D. Low dividend yield and high beta
Answer: B
Rationale: Value stocks are typically characterized by selling at a low price
relative to their underlying fundamentals. Common metrics for value stocks
include a low price-to-earnings (P/E) ratio, a low price-to-book (P/B) ratio, and
often a higher dividend yield. High P/E and high growth rates are characteristics
of growth stocks.
5. Under the Investment Advisers Act of 1940, an investment adviser must
maintain all required books and records for a period of not less than how
many years from the end of the fiscal year in which the last entry was
made?
A. 3 years
B. 5 years
C. 6 years
D. 10 years
Answer: B
Rationale: The Investment Advisers Act of 1940 requires federal covered
investment advisers to maintain all required books and records for a period of
not less than 5 years from the end of the fiscal year in which the last entry was
made. Additionally, these records must be kept in an easily accessible place for
the first 2 years.
, 6. A standard modern portfolio theory measure that quantifies the volatility of
a specific mutual fund relative to the market as a whole is known as:
A. Alpha
B. Beta
C. Standard deviation
D. R-squared
Answer: B
Rationale: Beta measures the systematic risk or volatility of a security or
portfolio relative to the broader market (usually represented by the S&P 500). A
beta of 1.0 indicates the security moves in tandem with the market; a beta
greater than 1.0 indicates higher volatility, and less than 1.0 indicates lower
volatility. Alpha measures risk-adjusted excess return, and standard deviation
measures total volatility.
7. According to the Uniform Securities Act, an investment adviser's
registration becomes effective at noon on the:
A. 15th day after filing a completed application
B. 30th day after filing a completed application
C. 45th day after filing a completed application
D. 60th day after filing a completed application
Answer: B
Rationale: Under the Uniform Securities Act, if no denial or stop order is in effect
and no proceeding is pending, registration automatically becomes effective at
noon on the 30th day after the application is filed, unless the Administrator
specifies an earlier date or establishes a different timeline due to amendments.
8. Which of the following retirement plans allows for the highest catch-up
contribution for an individual over the age of 50?
